Though often overlooked, the trucking industry is truly essential to the health of the US economy. Think about it: without truck drivers delivering goods, interstate commerce would grind to a screeching, tire-burning halt.
Unique Challenges
Despite the importance of trucking companies, the way the system is structured often leaves them in a shaky financial position. Truck companies submit invoices for services rendered, and then often wait 30-90 days for payment on the accounts receivables.
For a bigger company with large cash reserves, waiting to be paid would not be problems. But for small to mid-size companies operating on a good budget, it might not be an option. Expenses since payroll and gas sum up in the time between payment, and not paying your drivers is never a good business practice. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and is actually not a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside a mortgage. The following are some strategies for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to implies by which businesses sell their accounts receivables to a factoring company. Approval for factoring is based on the creditworthiness of the trucking company’s customers.
At the time of the sale, customer gets 80-90% of your cash back immediately from the debts. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This option is best for B2B businesses that cannot manage to wait for payment, as well as the cost is 4-5% monthly with a healthy annual interest rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest type of financing. The loan process involves an application and breakdown of the company’s creditworthiness and financial story. Small companies especially are more likely to be turned down for loans, although exceptions do live.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s financial institution. This form of funding is the for trucking outfits with a great credit ratings and don’t want the money immediately.
Cash-Advances
Cash advances take place when a small business receives a loan sum from a lender. The company pays the lender back with percentages associated with their monthly card receipts prior to loan (plus a predetermined rate) is repaid. There are a bunch legal limits to the rates, and so they also cannot be changed retroactively. The advantage of cash advances is immediate cash- can be the fastest method for obtaining cash without in order to be a loan shark.
This financing method ideal for trucking companies who need immediate cash for regarding amount of one’s time and have limited financing options. Costly is usually 20% or older.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It ideal for for trucking companies with valuable plant or equipment assets which have been underutilized, and also the cost is monthly lease payments plus the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and it is close to them to locate funding solutions that meet their individual needs. Being informed on all possibilities is one step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444